For once, the two things squeezing Wall Street both let go at the same time. Oil has slipped back below $100 a barrel and Treasury yields have eased off their highest levels since 2002, and that is enough to put US stock futures on the front foot into Tuesday’s cash open.
Nobody should mistake it for a turning point just yet. S&P 500 futures are up around a quarter of a percent, Dow futures roughly half a percent and Nasdaq 100 futures about a third, according to Reuters. It feels like a market that has been holding its breath for a week and has finally been allowed to exhale.
The Situation Right Now
The mood into New York is calmer than it was 24 hours ago. On Monday the 10-year Treasury yield touched around 5.35% and the 30-year briefly went above 5.70%, the highest for both since 2002, while the Nasdaq still managed to close at a record. Today the 10-year has dropped back to around 5.27% and the 30-year to about 5.63%. That is not a big move in the grand scheme of things, but it is the right direction for shares.
The trigger is mostly oil. Brent is down more than 2% at around $98 and WTI is down a similar amount near $87.40, as Gulf exports keep recovering and the G7’s emergency stockpile release starts to bite. Less pressure from energy means less pressure on inflation, and that takes a little heat out of the bond market.
What Changed Since This Morning?
This morning’s brief was about a stock market partying at record highs while the bond market picked up the bill. Since then, the bill has got slightly smaller. Yields have drifted lower through the European session, European government bonds have rallied too, and French debt has calmed after Marine Le Pen pledged to rein in public spending.
The oil picture has shifted as well. Brent was hovering around $100 at the London open and has since slid towards $98, even with more attacks on ships near the Strait of Hormuz. Reuters reported that Gulf crude exports beat pre-war levels on several days in September, and the head of trading house Vitol said around 14 million barrels a day are leaving the Middle East. In short, the oil is still getting out, and the market is starting to believe it.
The Biggest US Market Story
The real story is whether this is relief or a genuine change in direction for bonds. Treasury Secretary Scott Bessent has said the path of US borrowing could be turned around “very quickly” if the economy grows at 3% and spending is brought under control. That is a hopeful message, but the bond market has been reluctant to take the Treasury at its word lately, and yields rose almost half a percentage point after he declared himself “the house” last month.
The Federal Reserve is the other piece of the puzzle. Markets now see only about a one-in-five chance of a rate rise this month, down sharply from a week ago, but a December move is still very much in play. Monday’s ISM services survey showed prices paid by service companies at their highest since 2022, which is exactly the kind of number that keeps the Fed alert. The minutes from the Fed’s last meeting land on Wednesday evening, so today’s calm could be tested quite quickly.
Stocks Moving Before The Bell
The big mover is Option Care Health, up more than 20% before the open on reports that McKesson and private equity firm Clayton, Dubilier & Rice are nearing a deal to buy the home infusion group for close to $5 billion. Takeover premiums like that are a reminder that dealmaking is alive and well, even with borrowing costs this high.
The AI trade is ticking along nicely. Nvidia is up about 0.7%, and AMD is more than 1% higher after chief executive Lisa Su said the company plans to increase chip supply substantially in 2027 because demand is so strong. Meta, Tesla and Amazon are each up around 0.6%. Vaxcyte is giving back nearly 4% after jumping more than 30% on Monday on its vaccine trial results, and memory and storage names such as Micron, Western Digital and Seagate are softer. Constellation Brands reports after the close, and Paramount’s takeover of Warner Bros. Discovery is set to complete today.
FX and the Dollar
The dollar has lost a little of its swagger. The dollar index is down about 0.2% near 102, as lower Treasury yields take away some of its appeal. The euro has bounced to around 1.124 after flirting with a 17-month low on Monday, helped by calmer French bonds, and sterling is up a touch near $1.324. The yen remains weak at around 158 to the dollar, which keeps Japan’s intervention risk in the background.
Bonds
This is the market that matters most for shares right now. A 10-year yield above 5% makes cash and bonds a serious alternative to equities, so every small fall in yields gives stocks a bit more room. The test comes later today with a $58 billion three-year Treasury auction, which will show how keen investors are to lend to the US government at these levels. UK gilt yields are also easing, which is helping the FTSE 100, up about 0.5% near 10,550.
Commodities
Oil is the headline, with Brent back below $100, but supply buffers are still thin. Chevron’s chief executive warned today that oil and fuel inventories are running low while the Middle East conflict continues, so a fresh shock could reverse this quickly. Gold has recovered from a two-month low earlier in the day and is up about 0.7% near $4,187, helped by the softer dollar and lower yields.
Today’s Remaining Catalysts
US trade figures for August come out at 13:30 UK time, an hour before the cash open at 14:30. After that, the focus is on the Fed. New York Fed President John Williams speaks at 14:05 UK, Governor Michelle Bowman at 15:45 and Kansas City Fed President Jeff Schmid at 18:15. The three-year auction results arrive at 18:00 UK. Any hint from Fed speakers that a December rise is still the base case could push yields back up, while a softer tone would extend today’s relief.
Levels Traders Are Watching
For the S&P 500, Monday’s close near 7,774 is the first reference, with futures trading around 7,847. For the Nasdaq, the question is whether Monday’s record close can hold now that chip stocks are leading again. In bonds, the 10-year’s range today between roughly 5.27% and 5.33% is the line in the sand, and Monday’s high near 5.35% is the bigger marker. For oil, $100 on Brent and $90 on WTI are the round numbers in play. In currencies, the dollar index around 102 and the euro near 1.12 are worth keeping an eye on.
Where That Leaves Us Into The Bell
Our read is that the bias into the open is mildly positive, but it is a relief rally rather than the all-clear. The evidence is straightforward: oil is lower, yields are lower and futures are higher, with dealmaking and AI chip demand giving traders something to buy. What is missing is any sign that the bigger pressures on bonds, government borrowing and sticky service-sector inflation, have actually gone away.
The opportunities are likely to be in sectors that benefit from cheaper energy and lower yields, such as transport and technology, as well as in single-stock stories like Option Care Health. The risks are a hawkish message from Fed speakers this afternoon, a weak three-year auction or a fresh attack in the Gulf that sends oil straight back above $100. What would change the view is the 10-year yield: a move back above 5.35% would undo today’s relief, while a slide towards 5.20% would give stocks more room to run. The markets to watch are the 10-year Treasury, Brent, Nasdaq 100 futures and the dollar index.
For beginners, the lesson is that oil, bond yields and stocks are linked. When oil falls, inflation worries ease, yields tend to drop and shares usually find it easier to rise. But one quiet morning does not undo a week of pressure. This is an educational view of the market, not advice to buy or sell anything.
If you want to see how you would handle a session like this, where the pressure lifts but the bigger risks are still sitting there, the free Samuel & Co Trading trader assessment is a good place to test your own approach.
